Taxation Joan Fung Age 67 Is Married To Alan Age 56

Taxationjoan Fung Age 67 Is Married To Alan Age 56 Who Has Th

Taxationjoan Fung, age 67, is married to Alan, age 56, who has three children from a previous marriage, ages 22, 20, and 15. The children live with the couple and are supported by both. Joan is a manager with X Ltd., and Alan is an economist who occasionally does contract work at minimum wage. Alan has a mental impairment that prevents him from caring for the children. Joan has multiple sources of income, including salary, dividends, interest, capital gains, rental properties, and a pension. Alan has income from part-time employment. Joan's children are students, and Joan paid for their educational and rehabilitative expenses. Joan also made charitable donations, paid health care premiums, and incurred other expenses during the year. Joan has prior-year tax losses and a partnership with her brother managing a business. Additionally, Joan sold properties during the year and disposed of assets related to her business. The company X Inc. has detailed financial statements, and Joan’s real estate transactions are significant. The assignment requires preparing complete federal tax forms (T1-1, T1-2, T1-3, T1-4) and relevant schedules, including non-refundable credits, for the 2011 taxation year, based on the comprehensive financial and personal details provided.

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Introduction

The comprehensive tax return preparation for Joan Fung and her household in 2011 represents a complex scenario involving diverse income sources, property transactions, and numerous deductions and credits. This analysis aims to accurately reflect the tax obligations of the individual taxpayer based on her personal and financial circumstances. The focus will be on preparing the required federal forms—T1-1 (Personal Tax Return), T1-2 (Schedule 1 — Federal Tax), T1-3 (Federal Non-Refundable Tax Credits), and T1-4 (Schedule 4 — Statement of Investment Income)—alongside federal schedules to incorporate all the relevant information, ensuring compliance with Canadian tax laws.

Personal and Family Details

Joan Fung, aged 67, is married to Alan, aged 56, who suffers from a mental impairment and cannot care for their three children from a previous marriage. These children—aged 22, 20, and 15—reside with the couple, and both parents support them financially. Joan’s marital status significantly impacts her eligibility for spousal and family-related credits, while Alan’s incapacity may influence access to certain deductions and credits. The children’s educational status also plays a role in claiming tuition, education, and textbook credits beneficial during her 2011 tax filings.

Income Analysis

Joan's salary slips indicate a gross salary of $130,000, with net after-tax income, accounting for withholdings, approximately $89,653. Her income sources extend beyond employment remuneration, including:

• Dividends from Y Ltd. (a Canadian-Controlled Private Corporation) totaling $3,600 and dividends from Bell Canada amounting to $5,000.
• Interest income from Canada Savings Bonds ($4,000) and Canadian-sourced interest ($2,000), along with interest earned from a loan to her sister ($875).
• Taxable capital gains totaling $31,400, adjusted for allowable capital losses of $40,000, and including gains from Canada Ltd. and a Canadian artist’s painting.
• From rental properties purchased in 2011, with operating cash flows detailed as gross rents and expenses, leading to net rental income calculations.
• Joan receives a pension of $54,000 annually from her former employer and Old Age Security pension of $6,400.

Alan’s part-time employment contributes $8,000 in income, which must be included in their joint tax return, with considerations for spousal credits and income splitting options where permissible.

Rental Property and Capital Transactions

Joan owned two rental properties at the start of 2011. She sold the City Home in September 2011 for $1,170,000, realizing a gain that must be calculated considering the adjusted cost base ($1,000,000). The cottage was purchased in 2007 for $400,000, valued at $900,000 in 2011, which may involve capital gains or losses. Additionally, properties had operating cash flows and expenses, including property taxes, utilities, and upgrades, which affect net rental income/expenses for tax purposes. The sale of Property #2 for $248,000 resulted in a capital gain, reduced by the fair market value of land and buildings, and associated realizations and costs.

Investment and Asset Acquisitions

Joan’s investments include stocks, bonds, and intellectual property, with acquisitions during 2011 such as a patent, software, a manufacturing process, a vehicle, and assets like dies and moulds. The disposal of old assets and the recognition of capital cost allowances (CCA), including for new property, must be reflected appropriately. Interest on borrowed funds used for investments and capital asset purchases is deductible, with considerations for the timing of interest payments and asset costs.

Business and Partnership Interests

Joan's investment in her family-owned business, Y Ltd., involves her 40% share of profits or losses, with detailed financial statements provided. The company's net income before taxes is $325,000, with specific items such as inventory reserves, asset disposals, and expenses affecting taxable income. Adjustments are necessary for accounting provisions that are non-deductible for tax, like inventory reserves, and for the sale of land and licenses. Furthermore, inter-company transactions, depreciation, and amortization of intangible assets must be accurately incorporated, including the impact of CCA classes and recapture or terminal losses.

Other Expenses and Credits

Joan paid for educational expenses for her children, including tuition, rehabilitative therapy, and child care costs. She made charitable donations to a university and political parties, eligible for non-refundable tax credits, which are calculated considering thresholds and donation limits. Other deductions include health premiums, interest paid on mortgages, and various business expenses. The net capital loss and non-capital loss carried over from prior years are to be used to offset current taxable income.

Tax Calculation and Final Forms

Based on the detailed financial data, the completed forms will encapsulate the following components:

• Summary of income, deductions, and credits on T1-1.
• Calculation of federal tax payable, credits, and taxes withheld on T1-2 and Schedule 1.
• Declaration of non-refundable tax credits, including Basic Personal Amount, spouse amount, age amount, disability, tuition, and charitable credits on T1-3.
• Reporting of investment income, capital gains, and associated deductions on T1-4 and Schedule 4.
• Inclusion of detailed asset disposals, depreciation recapture, and other adjustments following CRA guidelines.

The final tax calculation will reflect all income sources, eligible deductions, and credits, providing the federal tax payable or refund due for the 2011 taxation year for Joan and her household. Ensuring thorough cross-reference of all data points guarantees compliance with Canadian tax law and maximizes allowable benefits.

Conclusion

Preparing Joan Fung’s comprehensive tax return for 2011 involves integrating numerous income streams, property transactions, and deductions within the federal tax forms and schedules. The detailed financial and personal data necessitates careful calculations, adherence to tax regulations, and optimized utilization of credits to accurately determine her tax liability or refund. This process exemplifies the complexity of individual taxation in Canada, particularly when dealing with multiple income types, real estate transactions, business interests, and family circumstances affecting credits.

References

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• Royal Bank of Canada. (2012). Guide to Canadian Taxation. Toronto: RBC Publishing.
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